Zenith Infotech: Update on Bond Default Case

The legal case between Zenith Infotech and bond holders is expected to resume the week of November 21, according to the Times of India. In the meantime, Zenith Infotech apparently has promised the High Court that it will not sell or spin off its cloud computing business. That statement is not to be confused with Zenith Infotech’s recent spin-off of Zenith RMM. Here’s why.

I don’t believe Zenith Infotech has any plans to sell its core remaining businesses — backup and disaster recovery (BDR), SmartStyle and MirrorCloud. But it sounds like bondholders and the India court system were seeking assurances that Zenith Infotech wouldn’t make any big financial moves in the near-term.

Zenith Infotech defaulted on a bond payment in September 2011. Around the same time Zenith Infotech sold control of Zenith RMM to Summit Partners, a growth equity firm. Bondholders have since pursued financial details about the deal. Zenith Infotech has been trying to block details from being shared, but Summit Partners has indicated that it will disclose information about the Zenith RMM purchase if the information remains confidential between major parties in the case, according to India media outlets.

Although Zenith RMM and Zenith Infotech remain partners, Zenith RMM has attempted to distance itself from the Zenith Infotech financial debate, while also indicating that Zenith RMM is a completely separate company. Zenith Infotech, meanwhile, continues to evangelize its cloud solutions during road shows and major technology conferences such as the recent IT Nation gathering in Orlando, Fla.

Yes, some MSPs are abandoning Zenith Infotech amid the bond default case. And a large number of cloud storage providers say they have successfully recruited MSPs away from Zenith Infotech. However, HTG Peer Group Founder Arlin Sorensen says FUD (fear, uncertainty and doubt) about Zenith Infotech has been overstated.

Sorensen continues to leverage Zenith Infotech’s BDR solutions in his own business, though he does keep a watchful eye on market alternatives just in case he ever needs them. Also, Sorensen believes Zenith RMM’s parent, Summit Partners, has deep pockets and will continue to expand Zenith RMM’s universe of business and technology partners.

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